Sabaf

Quarterly Report • May 12, 2020

INTERIM MANAGEMENT STATEMENT

AT 31 MARCH 2020

SABAF S.p.A. Via dei Carpini, 1 – OSPITALETTO (BS) ITALY Fully paid-in share capital: € 11,533,450 www.sabaf.it

Table of Contents

Group structure and corporate officers	3
Consolidated statement of financial position	4
Consolidated income statement	5
Consolidated statement of comprehensive income	6
Statement of changes in consolidated shareholders' equity	7
Consolidated statement of cash flows	8
Consolidated net financial position	9
Explanatory notes	10
Statement of the Financial Reporting Officer	14

Group structure

Parent company

SABAF S.p.A.

Subsidiaries and equity interest pertaining to the Group

Companies consolidated on a line-by-line basis
Faringosi Hinges s.r.l.	100%
Sabaf do Brasil Ltda.	100%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited	100%
Sirteki (Sabaf Turkey)
Sabaf Appliance Components (Kunshan) Co., Ltd.	100%
A.R.C. s.r.l.	70%
Okida Elektronik Sanayi ve Tickaret A.S	100%
Sabaf US Corp.	100%
C.M.I. s.r.l.	68.5%
C.G.D. s.r.l.	68.5%
C.M.I. Polska Sp. Zoo.	68.5%
Companies measured at equity
Handan ARC Burners Co., Ltd.	35.7%
Non-consolidated companies
Sabaf India Private Limited	99.33%

Board of Directors

Chairman	Giuseppe Saleri
Vice Chairman (*)	Nicla Picchi
Chief Executive Officer	Pietro Iotti
Director	Gianluca Beschi
Director	Claudio Bulgarelli
Director	Alessandro Potestà
Director (*)	Carlo Scarpa
Director (*)	Daniela Toscani
Director (*)	Stefania Triva

(*) independent directors

Board of Statutory Auditors

Chairman	Alessandra Tronconi
Statutory Auditor	Luisa Anselmi
Statutory Auditor	Mauro Vivenzi

Consolidated statement of financial position

	31/03/2020	31/12/2019	31/03/2019
(€ /000)
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	73,803	75,885	70,479
Investment property	3,869	3,976	4,198
Intangible assets	49,324	51,668	37,849
Equity investments	185	115	375
Non-current financial assets	60	60	120
Non-current receivables	284	297	233
Deferred tax assets	6,583	6,505	4,946
Total non-current assets	134,108	138,506	118,200
CURRENT ASSETS
Inventories	34,080	35,343	37,676
Trade receivables	53,136	46,929	44,769
Tax receivables	3,067	4,458	3,439
Other current receivables	2,694	1,459	1,776
Current financial assets	1,233	1,266	60
Cash and cash equivalents	12,956	18,687	12,478
Total current assets	107,166	108,142	100,198
ASSETS HELD FOR SALE	0	0	0
TOTAL ASSETS	241,274	246,648	218,398
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital	11,533	11,533	11,533
Retained earnings, Other reserves	97,284	92,580	105,061
Net profit for the period	1,547	9,915	2,115
Total equity interest pertaining to the Parent Company	110,364	114,028	118,709
Minority interests	7,181	7,077	1,686
Total shareholders' equity	117,545	121,105	120,395
NON-CURRENT LIABILITIES
Loans	42,979	44,046	41,515
Other financial liabilities	7,383	7,383	1,938
Post-employment benefit and retirement provisions	3,718	3,698	2,783
Provisions for risks and charges	988	995	704
Deferred tax liabilities	6,977	7,273	2,915
Non-current payables	68	0	0
Total non-current liabilities	62,113	63,395	49,855
CURRENT LIABILITIES
Loans	19,562	19,015	17,208
Other financial liabilities	4,803	4,637	370
Trade payables	26,558	27,560	20,746
Tax payables	1,617	1,802	2,769
Other payables	9,076	9,134	7,055
Total current liabilities	61,616	62,148	48,148
LIABILITIES HELD FOR SALE	0	0	0
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	241,274	246,648	218,398

Consolidated Income Statement

	Q1 2020		Q1 2019		12M 2019
(€ /000)
INCOME STATEMENT COMPONENTS
OPERATING REVENUE AND INCOME
Revenue	43,852	100.0%	37,635	100.0%	155,923	100.0%
Other income	1,049	2.4%	672	1.8%	3,621	2.3%
Total operating revenue and income	44,901	102.4%	38,307	101.8%	159,544	102.3%
OPERATING COSTS
Materials	(19,138)	-43.6%	(14,279)	-37.9%	(57,464)	-36.9%
Change in inventories	(304)	-0.7%	(1,265)	-3.4%	(8,617)	-5.5%
Services	(7,570)	-17.3%	(7,334)	-19.5%	(29,488)	-18.9%
Personnel costs	(10,253)	-23.4%	(8,860)	-23.5%	(37,103)	-23.8%
Other operating costs	(379)	-0.9%	(363)	-1.0%	(1,698)	-1.1%
Costs for capitalised in-house work	432	1.0%	411	1.1%	1,859	1.2%
Total operating costs	(37,212)		-84.9% (31,690)	-84.2%	(132,511)	-85.0%
OPERATING PROFIT BEFORE
DEPRECIATION & AMORTISATION,
CAPITAL GAINS/LOSSES, AND WRITE DOWNS/WRITE-BACKS OF NON-CURRENT	7,689	17.5%	6,617	17.6%	27,033	17.3%
ASSETS (EBITDA)
Depreciations and amortisation	(4,337)	-9.9%	(3,312)	-8.8%	(15,183)	-9.7%
Capital gains/(losses) on disposals of non-current
assets	8	0.0%	45	0.1%	46	0.0%
OPERATING PROFIT (EBIT)	3,360	7.7%	3,350	8.9%	11,896	7.6%
Financial income	72	0.2%	108	0.3%	638	0.4%
Financial expenses	(424)	-1.0%	(340)	-0.9%	(1,339)	-0.9%
Exchange rate gains and losses	(816)	-1.9%	(397)	-1.1%	(1,380)	-0.9%
Profits and losses from equity investments	0	0.0%	0	0.0%	(39)	0.0%
PROFIT BEFORE TAXES	2,192	5.0%	2,721	7.2%	9,776	6.3%
Income taxes	(512)	-1.2%	(565)	-1.5%	407	0.3%
NET PROFIT FOR THE PERIOD	1,680	3.8%	2,156	5.7%	10,183	6.5%
of which
Minority interests	133	0.3%	41	0.1%	268	0.2%
PROFIT ATTRIBUTABLE TO THE GROUP	1,547	3.5%	2,115	5.6%	9,915	6.4%

Consolidated statement of comprehensive income

(€ /000)	Q1 2020	Q1 2019	12M 2019
NET PROFIT FOR THE PERIOD	1,680	2,156	10,183
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year
Actuarial evaluation of post-employment benefit	0	0	(26)
Tax effect	0	0	6
	0	0	(20)
Total profits/losses that will be subsequently reclassified under profit (loss) for the year Forex differences due to translation of financial statements in foreign currencies Total other profits/(losses) net of taxes for the year	(4,836) (4,836)	(1,319) (1,319)	(3,323) (3,343)
TOTAL PROFIT	(3,156)	837	6,840
of which
Minority interests	133	41	268
TOTAL PROFIT ATTRIBUTABLE TO THE GROUP	(3,289)	796	6,572

Statement of changes in consolidated shareholders' equity

(€ /000)	Share capital	Share premium reserve	Legal reserve	Treasury shares	Translation reserve	Post employment benefit discounting reserve	Other reserves	Profit for the year	Total Group shareholders' equity	Minority interests	Total shareholders' equity
Balance at 31 December 2018	11,533	10,002	2,307	(6,868)	(16,134)	(526)	101,774	15,614	117,702	1,644	119,346
Allocation of 2018 profit - dividends paid out - carried forward							9,554	(6,060) (9,554)	(6,060)		(6,060)
IFRS 2 measurement stock grant plan							681		681		681
Sale of treasury shares				4,600			208		4,808		4,808
Change in the scope of consolidation							(981)		(981)	5,165	4,184
C.M.I. Group put option							(8,700)		(8,700)		(8,700)
Other changes					518		(512)		6		6
Total profit at 31 December 2019					(3,323)	(20)		9,915	6,572	268	6,840
Balance at 31 December 2019	11,533	10,002	2,307	(2,268)	(18,939)	(546)	102,024	9,915	114,028	7,077	121,105
Allocation of 2019 profit - carried forward							9,915	(9,915)
IFRS 2 measurement stock grant plan							247		247		247
Purchase of treasury shares				(772)					(772)		(772)
Other changes							100		100	(29)	71
Total profit at 31 March 2020					(4,836)			1,547	(3,289)	133	(3,156)
Balance at 31 March 2020	11,533	10,002	2,307	(2,990)	(23,775)	(546)	112,286	1,547	110,364	7,181	117,545

Consolidated statement of cash flows

Cash and cash equivalents at beginning of period 18,687 13,426 13,426 Net profit/(loss) for the period 1,680 2,156 10,183 Adjustments for: - Depreciation and amortisation for the period 4,337 3,312 15,183 - Write-downs of non-current assets (8) 0 0 - Realised gains/losses 0 (45) (46) - IFRS 2 measurement stock grant plan 0 129 681 - Profits and losses from equity investments 247 0 39 - Financial income and expenses 352 232 701 - Income tax 512 565 (407) Change in post-employment benefit 20 144 300 Change in risk provisions (7) (21) 270 Change in trade receivables (6,207) 2,163 10,148 Change in inventories 1,263 1,503 9,090	(€ /000)	Q1 2020	Q1 2019	12M 2019
	Change in trade payables	(902)	(469)	(2,901)
Change in net working capital (5,846) 3,197 16,337
Change in other receivables and payables, deferred tax liabilities 371 (887) 1,344
Payment of taxes (1,293) (642) (2,952)
Payment of financial expenses (191) (333) (1,339)
Collection of financial income 72 108 638
Cash flows from operations 246 7,915 40,932
Net investments (3,339) (1,616) (12,014)
Free cash flow (3,093) 6,299 28,918
Repayment of loans (2,376) (12,885) (29,682)
New loans 1,385 2,368 18,271
Change in financial assets 0 3,451 2,245
Purchase of treasury shares (722) 0 3,146
Payment of dividends 0 0 (6,060)
Cash flows from financing activities (1,713) (7,066) (12,080)
Okida acquisition 0 (317) (317)
C.M.I. acquisition 0 0 (10,475)
Foreign exchange differences (925) 136 482
Net cash flows for the period (5,731) (948) 6,528
Cash and cash equivalents at end of period 12,956 12,478 19,954
Net current financial debt 23,132 17,518 23,652
Non-current financial debt 50,362 43,453 51,430
Net financial debt 60,538 48,493 55,128

Consolidated net financial position

	(€ /000)	31/03/2020	31/12/2019	31/03/2019
A.	Cash	26	19	18
B.	Positive balances of unrestricted bank accounts	12,628	18,590	11,435
C.	Other cash equivalents	302	79	1,025
D.	Liquidity (A+B+C)	12,956	18,688	12,478
E.	Current financial receivables	1,233	1,266	60
F.	Current bank payables	3,596	3,313	6,177
G.	Current portion of non-current debt	14,779	14,653	10,542
H.	Other current financial payables	5,990	5,686	859
I.	Current financial debt (F+G+H)	24,365	23,652	17,578
J.	Net current financial debt (I-E-D)	10,176	3,698	5,040
K.	Non-current bank payables	39,575	40,569	39,468
L.	Other non-current financial payables	10,787	10,861	3,985
M.	Non-current financial debt (K+L)	50,362	51,430	43,453
N.	Net financial debt (J+M)	60,538	55,128	48,493

Explanatory notes

Accounting standards and scope of consolidation

The Interim Management Statement of the Sabaf Group at 31 March 2020 is prepared in compliance with the Stock Exchange (Borsa) Regulation that establishes, among the requirements for maintaining the listing on the STAR segment of the MTA, the publication of interim management reports.

This statement, prepared in continuity with the past, does not contain the information required under IAS 34.

Accounting standards and policies are the same as those adopted for preparation of the consolidated financial statements at 31 December 2019, which should be consulted for reference. All the amounts contained in the statements included in this Interim Management Statement are expressed in thousands of euro.

We also draw attention to the following points:

• ➢ The Interim Management Statement was prepared according to the "discrete method of accounting" whereby the quarter in question is treated as a separate financial period. In this respect, the quarterly income statement reflects the income statement components pertaining to the period on an accrual basis;
• ➢ the financial statements used in the consolidation process are those prepared by the subsidiaries for the period ended 31 March 2020, adjusted to comply with Group accounting policies, where necessary;
• ➢ the parent company, Sabaf S.p.A., and the subsidiaries Faringosi-Hinges s.r.l., A.R.C. s.r.l., Sabaf do Brasil Ltda, Sabaf Turchia, Okida Elektronik, Sabaf Appliance Components (Kunshan) Co., Sabaf U.S., C.M.I. s.r.l., C.G.D. s.r.l., C.M.I. Polska Sp. Zoo were consolidated on a line-by-line basis;
• ➢ the subsidiary Handan A.R.C. Burners Co. was consolidated using the equity method as from 31 December 2019;
• ➢ the company Sabaf India Private Limited, in which Sabaf made an initial capital contribution of € 20,000 during the first quarter of 2020, was not consolidated in that not yet operational and therefore irrelevant for consolidation purposes;
• ➢ the scope of consolidation did not change compared to 31 December 2019; on the other hand, compared to the comparative data at 31 March 2019, the companies of the C.M.I. Group (C.M.I. s.r.l., C.G.D. s.r.l., C.M.I. Polska Sp. Zoo), over which the Group acquired control on 31 July 2019, were included in the consolidation;

The Interim Management Statement at 31 March 2020 has not been independently audited.

	Q1 2020	%	Q1 2019	%	% change	12M 2019	%
Italy	8,470	19.3%	8,852	23.5%	-4.3%	31,161	20.0%
Western Europe	2,544	5.8%	3,409	9.1%	-25.4%	12,277	7.9%
Eastern Europe	16,671	38.0%	11,964	31.8%	+39.3%	55,059	35.3%
Middle East and Africa	2,322	5.3%	1,258	3.3%	+84.6%	7,050	4.5%
Asia and Oceania	1,524	3.5%	1,914	5.1%	-20.4%	9,198	5.9%
South America	6,778	15.5%	6,416	17.0%	+5.6%	23,451	15.0%
North America and Mexico	5,543	12.6%	3,822	10.2%	+45.0%	17,727	11.4%
Total	43,852	100%	37,635	100%	+16.5%	155,923	100%

Sales breakdown by product category (Euro x 1000)

	Q1 2020	%	Q1 2019	%	% change	12M 2019	%
Gas parts	30,722	70.1%	32,591	86.6%	-5.7%	122,205	78.4%
Hinges	9,931	22.6%	2,768	7.4%	+258.8%	23,774	15.2%
Electronic components	3,199	7.3%	2,276	6.0%	+40.6%	9,944	6.4%
Total	43,852	100%	37,635	100%	+16.5%	155,923	100%

Management Statement

The world is facing an unprecedented health emergency due to the rapid and global spread of the coronavirus pandemic and the violent impacts on the lives of people and businesses. In this context, the priority of the Sabaf Group is to ensure the continuity of its activities by protecting the health and safety of people, aware that it is a leading global player in a sector - household appliances - of great importance in any economy. The Group believes that its business model - oriented towards long-term sustainability and characterised by a high level of verticalisation of production and production facilities close to the main markets - is adequate to face future challenges and new scenarios.

Consolidated results for Q1 2020

After an extremely positive start to the year with sales up by about 30% in the first two months, the rapid spread of the pandemic impacted the business from the second half of March, making it necessary to suspend production at Italian plants. The Group immediately activated the safety protocols and limited the production shutdown period to only 3 weeks (from 16 March to 3 April).

Sales revenue amounted to € 43.9 million in the first quarter of 2020, up by 16.5% from € 37.6 million in the same quarter of 2019 (-3.2% taking into consideration the same scope of consolidation). China and European markets were the areas that suffered most in terms of sales.

The EBITDA of the period was € 7.7 million, equal to 17.5% of sales, up 16.2% compared to the € 6.6 million (17.6% of sales) of the first quarter of 2019. After depreciations and amortisation of € 4.4 million (€ 3.1 million in the first quarter of 2019), EBIT was € 3.4 million, corresponding to 7.7% of turnover, up 0.3% on the same period of 2019 (8.9% of turnover). During the quarter, the Group recorded negative forex differences of € 0.8 million (€ 0.4 million in the first quarter of 2019), following the depreciation of the Turkish lira against the Euro. Net profit for the period was € 1.5 million, down by 26.9% compared to € 2.1 million in the first quarter of 2019.

At 31 March 2020, the impact of the net working capital on revenue was 32% compared to 38% at 31 March 2019 and 29% at 31 December 2019. The increase in working capital in the first quarter of 2020 (€ 55.7 million, compared with € 49.7 million at the end of 2019) reflects the increase in trade receivables, following higher sales in the period compared with the end of 2019. The management of working capital is closely monitored: average days for collection have not increased significantly and inventories remain at physiological levels, after the recent interventions that made it possible to optimise logistics management. With respect to suppliers, the Sabaf Group committed to strict compliance with previously agreed payment terms.

During the quarter, € 3.3 million was invested (€ 1.6 million in Q1 2019 and € 12 million for the whole of 2019) and is mainly allocated to new global projects in start-up with some large customers. At present, the Group believes that the strategy aimed at strengthening its international presence remains valid and has therefore not deemed it appropriate to revise the plan of organic investments for the current year, although some investments will be delayed due to current restrictions on mobility.

At 31 March 2020, net financial debt was € 60.5 million (€ 55.1 million at 31 December 2019), of which €10.4 million relating put options granted to minorities. The financial situation remains absolutely solid and the Group has unused short-term lines of credit. The shareholders' meeting held on 4 May last approved the Board of Directors' proposal to allocate the 2019 profit entirely to reserve as a matter of prudence.

Significant non-recurring, atypical and/or unusual transactions

During the first quarter of 2020, the Group did not engage in significant transactions qualifying as nonrecurring, atypical and/or unusual, as envisaged by the CONSOB communication of 28 July 2006.

Outlook

In many of the main markets, demand and production levels have been strongly impacted by restrictions imposed by local authorities leading to postponement or cancellation of orders by customers. In April, sales fell by 18% (30% taking into consideration the same scope of consolidation), while a partial recovery is expected as early as May. Based on the information currently available, the Group expects to close the first half of the year with sales of between € 78 and € 82 million (up 4% - 9% compared with the first half of 2019).

For the rest of the year, visibility is still extremely limited. In the absence of events that would have a further lasting impact on consumption in its main target markets, the Group expects a gradual recovery with sales in the second half of the year higher or, in the worst-case scenario, in line with those of the first half.

Statement of the Financial Reporting Officer pursuant to Article 154-bis (2) TUF

The Financial Reporting Officer, Gianluca Beschi, declares that, pursuant to paragraph 2, Article 154 bis of Legislative Decree 58/1998 (Consolidated Finance Act), the accounting information contained in the Interim Management Statement at 31 March 2020 of Sabaf S.p.A. corresponds to the Company's records, books and accounting entries.

Ospitaletto (BS), 12 May 2020

Financial Reporting Officer Gianluca Beschi